While President Trump previewed pieces of his “America First” budget plan a couple weeks ago, asking Congress for a $54 billion increase in defense spending, the details of the plan weren’t revealed until Thursday. Now that the plan is available for public scrutiny, it looks like Trump’s America First may find resistance on both sides of the aisle. What’s the plan look like? Where is the biggest resistance likely to come from?
Who are the Casualties of Trump’s America First Budget?
President Trump has made a pretty clear statement that he wants to focus on defense spending with his new America First plan. What wasn’t clear is where those funds are supposed to come from.
Now we know.
Trump has proposed what the administration calls a “hard-power” budget. The goal of the plan is to put into play Trump’s priorities without increasing the fiscal 2018 deficit or national debt. And those priorities are the military – and most definitely not the environment in any way, shape, or form.
Trump’s biggest budget cut in his proposal would be to the Environmental Protection Agency. The president is proposing a 31% cut to the EPA to help cover the $54 billion boost in Pentagon spending.
Trump is also budgeting into the plan $1.5 billion in 2017 and $2.6 billion in 2018 for his border wall which he said Mexico would pay for.
Other cuts would come to the US State Department, which would see its budget slashed by 28%.
The Department of Agriculture also gets slashed, by 20.7%, along with the Labor Department (20.7%), Alternative Energy Dept (17.9%), Health and Human Services (down 17.9%), Commerce Department (down 15.7%), and Department of Education, which would be slashed by 13.5%.
Departments of Transportation (12.7%), Interior (11.7%), Energy (5.6%), Treasury (4.4%), and Justice (3.8%) would also all see budget cuts for 2018. The administration will also look to cut out all federal support for Public Broadcasting Service (PBS).
How will the plan play out in Congress?
Key Republicans such as Senate Majority Leader Mitch McConnell have already rejected the idea of deep cuts to the State Department while Democrats will vehemently oppose any social programs being cut.
The president’s new budget would require legislation to alter spending caps that congressional Republicans and Democrats agreed to during President Barack Obama’s second term.
That legislation is subject to filibuster.
Trump needs 60 votes to get approval, which would mean that he needs to convert 8 Democrat Senators – assuming that all Republicans join him, which is a long shot at the moment.
The current plan leaves unanswered questions about tax cuts, entitlement spending and economic growth forecasts, which should be answered in May, when the White House releases its full budget.
Watch this video from ABC News where Mick Mulvaney discusses President Trump’s new budget proposal:
For now, traders would do well to stick with trading publicly traded defense stocks, such as Heico Corp. (HEI, HEI-A), Raytheon Co. (RTN), and General Dynamics Corp. (GD), all of which should continue to rise as Trump pushes to boost the military.
Federal Reserve raised interest rates by a quarter percent, how does this affect the consumers? Find out more here.
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Stalemate Ends: Next Stimulus Bill Could Be Approved In The Coming Days
It appears the stalemate between Republicans and Democrats may be coming to an end soon. Both sides have reported progress towards another stimulus bill.
During an appearance on Fox Business last night, Treasury Secretary Steve Mnuchin said both sides have agreed to include another round of stimulus checks to American families in the next coronavirus relief package.
While speaking with Lou Dobbs, Mnuchin said the next relief bill would include a stimulus payment “similar” to the ones sent out last spring as part of the CARES Act.
It’s likely the same framework would be used for this round of checks. This means working adults would receive a check worth up to $1,200 and up to $500 for each dependent.
Stalemate Coming to an End
After a months-long stalemate, Secretary Mnuchin and House Speaker Nancy Pelosi spoke by phone yesterday. They will meet in person in the coming days. Mnuchin said he was “hopeful” both sides can reach an agreement. He also mentioned, “We still don’t have an agreement, but we have more work to do. And we’re going to see where we end up.”
The House speaker said she and Mnuchin had an “extensive conversation” and “found areas where we are seeking further clarification.”
With the news of a renewed effort to reach an agreement, Democratic leaders in the House postponed voting on a $2.2 trillion relief bill. Republicans had already indicated they would not approve a package with that price tag.
Mnuchin did indicate that President Trump has approved raising their original limit of $1 trillion for the next relief bill. He also suggested that Trump is comfortable with a price tag closer to $1.5 trillion.
Rep. Hakeem Jeffries, head of the Democratic caucus, said their Problem Solvers Proposal, put forth in mid-September with a price tag of $2 million, appears to be where Secretary Mnuchin will start negotiations.
“If you look at the Problem Solvers proposal, at the high end it’s approximately $2 trillion,” Jeffries told reporters in the Capitol. “And so I think that to the extent that Secretary Mnuchin has indicated that he will use the Problem Solver proposal as a basis for any counteroffer, actually brings us much closer to an agreement than we’ve ever been.”
The Problem Solvers Proposal includes about $500 billion in state and local relief. It also includes $1,200 stimulus checks and a replenishment for the Paycheck Protection Program. Republicans have said many times they won’t approve money to bail out poorly-run state and local municipalities.
House Majority Leader Steny Hoyer told reporters that the House would scrap a vote on their current plan and instead wait to vote on a bipartisan deal instead if it can be reached by Mnuchin and Pelosi.
“If we have a bipartisan deal … that is what we will move,” Hoyer told reporters.
PPP Bailout Money
Chinese firms got millions of PPP bailout money. The Paycheck Protection Program (PPP) provided relief for struggling small American businesses. With a $660 billion fund, help came to those who needed it, and it also arrived at some unintended recipients. Somehow, millions of dollars of forgivable loans went to Chinese-owned companies.
PPP Bailout Money | Chinese Firms Got Millions in Coronavirus
Consulting firm Horizon Advisory reviewed available PPP reports and found some interesting data. According to them, around 125 Chinese firms received between $192 to $419 million in PPP loans. The firms are either Chinese-owned or invested in Chinese financing. Among the borrowers were 32 companies that received more than $1 million each.
Small Business Relief
With a $2.2 trillion fund, the PPP provided loans to eligible firms during the pandemic. To qualify, firms must be small businesses with fewer than 500 employers. If they used 60% of the money for payroll, with some for rent and overhead, the loan becomes a grant instead. A program this big and well-funded will attract a lot of attention. Publicly traded firms applied and got approval for loans. As these companies got called out, many returned the money.
With the rules open for some interpretation, the PPP may have allowed some loopholes. Among the gaps was allowing American subsidies of foreign companies to apply.
Horizon Advisory co-founders Emily de La Bruyère and Nathan Picarsic noted the PPP’s lack of safeguards. They said that the “extent and nature of P.R.C.-owned, -invested and -connected entities among the P.P.P. loan recipients indicate that without appropriate policy guardrails, U.S. tax dollars intended for relief, recovery and growth of the U.S. economy — and small businesses in particular — risk supporting foreign competitors, namely China.”
Previously: PPP Recipients Revealed, 51 Million Jobs Saved
Companies that availed of the bailout include Continental Aerospace Technologies and Aviage Systems. Both are part of the Chinese military conglomerate Aviation Industry Corporation of China. CAT received $10 million in loans, while Aviage got $350,000.
HNA Group’s US subsidiaries HNA Group North America LLC and HNA Training Center NY got $1 million each. HNA Group is a Fortune Global 500 that deals in real estate, aviation, and financing.
Another one is BGI Americas Corporation, a subsidiary of China’s gene-testing BGI Group. When called out, BGIAC returned the money.
Biotech firm Dendreon Pharmaceuticals received a loan worth $5 million to $10 million. Its parent company, Nanjing Xinbai, is a state-invested company with ties to the CCP. These are the same organizations that President accuses of stealing intellectual property.
Mobile payment firm Citcon USA LLC received $150,000 to $350,000 in loan money. Its major investor, ZhenFund has ties to Alipay and WeChat, which are also targeted by Trump.
Fixing The PPP Bailout Money Loopholes
Horizon Advisory acknowledges that loans to Chinese companies saved American jobs. Butt, they also noted that these companies may have access to other sources of capital.
With the pandemic still wreaking havoc in the US, Congress is working on a second relief package. Republican lawmakers have submitted a provision that limits Chinese participation in future bailouts. Businesses owned in part or full by Chinese companies are not allowed to apply for loans. The same applies to companies with a Chinese resident on the board of directors.
Chinese companies receiving American tax dollars to continue operating on US soil? Companies owned by the same group of people accused by the President of stealing IP? The same country the President blames for the origin of the virus currently damaging the US? The irony is thick in this situation. The already shaky Sino-US relationship is facing yet another test.
Watch this video about the PPP Bailout Money:
Do you agree that PPP and other relief efforts should exclude Chinese companies? After all, they opened American offices and hired Americans during a global pandemic. Then again, they seem to operate under their own rules, and China is a US rival and competitor. Share what you think by leaving your comments below!
Moore: Republican’s Newest Stimulus Bill Has Fundamental Flaw
Stephen Moore says the Senate Republicans got most of the newest stimulus bill right but believes that it contains a “fundamental flaw” and President Trump shouldn’t sign it.
Moore, a member of President Trump’s economic recovery task force and an economist at FreedomWorks, says the plan put forward by Senate Majority Leader Mitch McConnell “isn’t half bad” and will help get the country back on track. He also says that we can “take solace in the fact that the price tag is “only” $1 trillion” compared to the HEROES ACT passed by Democrats and Speaker Nancy Pelosi that totalled a whopping $3 trillion.
Moore provided his thoughts on whether or not he sees a benefit from what he calls the “major planks” of the plan.
Another Round of $1,200 Stimulus Checks
Moore gives a “thumbs down” to this aspect of the bill. He believes it is counterproductive and rewards inactivity. He says “Dropping free money into people’s pockets is no road to prosperity. This isn’t a stimulus, it is a redistribution of money from producers to non-producers.”
Additional Funds For The Paycheck Protection Program
Moore says “let’s wait and see” how this plays out. It’s important that the government be repaid for these loans, and they don’t become forgivable grants, says Moore.
Unemployment benefits are reduced to $200 per week until states create their own plans that pay up to 70% of previous wages.
Letting the $600 per week unemployment benefits expire was “essential” says Moore, who gives this initiative a “thumbs up.” He says the CBO (Congressional Budget Office) found that five out of six workers were making more money staying unemployed than going back to work. He also points to a study by Casey Mulligan at the University of Chicago that found the additional unemployment benefits would reduce employment by almost 10 million jobs by the end of the year. Moore says “There is NO jobs recovery if this policy continues. No backing down.”
Liability Protection for Schools, Businesses, Churches, etc. As They Reopen
“Thumbs Up” says Moore. He says businesses that reopen need to be protected from frivolous lawsuits should someone get sick. Without liability protection, the Committee to Unleash Prosperity found that at least 500,000 jobs would be lost.
$100 Billion To Help Schools and Universities Reopen
Moore gives this a solid “thumbs down.” He says at the moment, most public schools have announced that they won’t be reopening in the fall, so what do they need the money for? “Any federal funding for schools this year and next should only be for schools that are open FULLTIME.”
Education Freedom Grants To Cover Scholarships For Private Schools and Payments To Parents For Homeschooling
“I feel like I’ve died and gone to heaven,” says Moore. He gives this a resounding “thumbs up.” He adds, “This will give potentially millions of parents, mostly with low incomes, a chance to send their kids to good schools this fall. Distance learning is a failure for at least half of the bottom half of children; they need in-class instruction.”
100% Deductibility For Business Meals and Entertainment
This gets a solid “thumbs down” from Moore. “What would a stimulus bill be without a few special interest giveaways to the corporate lobbyists?” he asks.
While Moore’s opinion of the bill is that they got it half right, he does point out what he believes is a fundamental flaw: a lack of a payroll tax cut through the rest of the year. He says it would help “150 million workers and nearly 30 million small businesses and self-employed business owners.”
Moore adds, “This would create up to 3 million jobs over the next six months and give a pay raise of 7.5 percent for every nurse, teacher, home care worker, construction worker, and police officer in America – the heroes of our economy.”
He worries that the bill that McConnell presented yesterday won’t survive negotiations with Democrats.
“All in all, a good bill. The problem is it will get much worse as Trump and McConnell begin to negotiate with Pelosi. There is not one single feature of the Pelosi bill that is positive for the economy,” says Moore.
His final thought is for the person who will eventually sign the bill into law.
“President Trump should not sign any final product without the payroll tax cut,” says Moore.
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